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ET Intelligence Group: The stock of VA Tech Wabag has lost 24% over the past 12 months after considering the sharp 9% jump in the three trading sessions since November 8 when the company reported a turnaround in its quarterly results. The phase of sluggishness in project execution seems to be over amid strong order book position. These factors make its current stock valuation attractive.

VA Tech Wabag is a water solutions and treatment company providing design, completion and operation of water and wastewater plants for municipal and industrial segments.Since it outsources project construction and erection, it operates on asset light business model.

The company's working capital requirement had increased in the past due to delays in domestic and overseas projects. However, in the September quarter, it reported improvement in the project execution. As a result, its working capital cycle shrank by seven days to 130 days compared to the year ago quarter.In the prior quarters, the working capital need was high since the company was expanding operations faster.

In the coming months, projects worth Rs 20,000 crore are expected to be awarded in the domestic water treatment sector. The prominent projects include mega sewage treatment plants in Maharashtra (worth about Rs 8,000 crore), desalination plants in Tamil Nadu (about Rs 5,000 crore) and water treatment plant projects in Delhi and Karnataka (about Rs 2,500 crore each). In addition, the company may secure a few projects in the government's river Ganges cleaning project titled `Namami Gange'.

At the end of the September quarter, the company had an order book of Rs 7,931 crore to be executed in the next two-three years. In the coming quarters, the margins may improve given its focus on lowering execution costs. The company's debt-equity ratio is at 0.4, which is manageable considering the revenue visibility.

At Friday's closing price of Rs 511.3, the stock was valued at 15.3 times its FY18 estimated earnings -lower than its three-year average multiple of 29.6. Considering the improving operations, lesser dependence on long-term borrowings and strong order pipeline, long-term investors may consider the stock for further analysis.